The Federal Reserve reported today that manufacturing production fell, as expected, by 0.6 percent June. (Fed release.) While today’s report clearly shows that the recession has extended into its 18th month, there is growing evidence that the pace of the economic downturn is starting to moderate. While manufacturing production fell at a significant 9.9 percent annual rate in the second quarter, this was half the drop in the prior two quarters.
Excluding the motor vehicle sector, where output has been affected by bankruptcy proceedings, the decline in manufacturing output last month was the shallowest since February. In addition, declines in the production of business equipment and consumer goods were milder in June than in recent months.
This information does not point to an imminent upturn in industrial output. However, while production fell in a majority (11 of the 19) manufacturing industries last month, there were some improvements. One minor bit of good news is that the production of wood products rose by 1.8 percent in June — the best performance since Dec 2006. Following a modest gain in May, this may be an early signal that the demand in the housing market may be starting to firm up.
UPDATE (4:05 p.m.): Michigan unemployment reaches 15.2 percent in June. (cw)